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PeopleSoft revenue misses lowered targets

Despite taking in the income it expected, sales come in below estimates. Guess who it's blaming?

PeopleSoft met lowered targets for earnings in the second quarter but fell short of revised revenue estimates, the software maker said on Tuesday.

PeopleSoft blamed a hostile takeover bid from rival Oracle for the lackluster financial results. Oracle fought an antitrust suit brought by the U.S. Justice Department over the proposed merger in a month-long trial in June.

"Our financial results in (the second quarter) reflected the heavy media coverage of the United States of America versus Oracle trial," PeopleSoft CEO Craig Conway said in a statement. "Clearly, it was the elephant in the room for our customers."

Excluding certain charges, PeopleSoft's net income for the second quarter, ended June 30, was $51 million, or 14 cents a share. That compares with $54 million, or 17 cents a share, a year ago. Earlier this month, the company warned that it would miss its previous target of 20 to 22 cents per share and reset its estimates at 13 to 15 cents per share.

Total revenue for the quarter was $647 million, which narrowly fell short of PeopleSoft's revised goal of $655 million to $665 million. Software revenue was $130 million, which came within a revised range of range of $129 to $133 million.

Analysts had anticipated earnings of 14 cents a share before amortization on sales of $661.6 million, according to a Thomson First Call survey.

Securities analysts have been skeptical of PeopleSoft's claim that Oracle was the main cause of its financial woes. PeopleSoft is grappling with its acquisition of software maker J.D. Edwards, a deal made last year, and is facing a widespread decline in corporate software spending, they have said.

During a teleconference Tuesday with securities analysts, Conway insisted the Oracle threat was far and away the biggest challenge for the company. Part of the fallout from the trial was the public exhibition of PeopleSoft's and Oracle's discount request forms, which show that both companies slash their prices by as much as 80 percent when bidding is intensely competitive. Armed with these normally top-secret forms, customers drove hard bargains, Conway said. Steeper discounting further chipped away at the company's second-quarter sales, he added.

Conway also confirmed what many analysts already suspected--that German rival SAP is cleaning up in the business applications market as PeopleSoft languishes in Oracle's shadow.

"We have an extensive list of customers who went to SAP citing the Oracle threat," Conway said during the teleconference.

Additionally, PeopleSoft is unlikely to achieve its full-year 2004 earnings targets of 92 cents to 95 cents per share on revenue of $2.8 billion to $2.9 billion because of the Oracle situation, said PeopleSoft Chief Financial Officer Kevin Parker. Parker, who joined Conway on the call, said the company would release updated guidance after a verdict in the Oracle trial is issued.

PeopleSoft's shares closed on Tuesday at $17.32, a gain of 21 cents, or 1.23 percent.